Investing for Survival

I have been in this business since 1968. So, I have seen a wide variety of crashes: the long drawn out crash (1970’s), the one day crashes (1987), the gut wrenching 60% plus crashes (2008) along with your everyday variety of 10-20% selloffs. As the above article points out, to assume none of these will happen again is fatally naïve. Especially at a time when equity valuations are stretched to the upside and the economic backdrop is worrisome at the least.

So, what is an investor to do. As a contrary opinionist, my solution is to always go to the stocks that are in the tank. Of course, they are there for a reason; but many have been beaten down more than they should. In addition, many also pay handsome dividends that can provide attractive income during periods of Market malaise. Among my holdings, I would point out (all ratings are from Value Line): ATT (7.7% yield, A++ rated), Altria (8.5% yield, B++ rated), AbbVie (5.9% yield, A rated), BEN (4.8% yield, A++ rated), Bank of Nova Scotia (6.4% yield, B++ rated), MSM (4.4% yield, A rated), XLE (energy sector ETF 7.2% yield).

Here is more (conventional) advice on dealing with today’s richly valued Market:

What high valuations mean for your retirement plan.

https://www.morningstar.com/articles/1004634/what-highish-equity-valuations-mean-for-your-retirement-plan

Where to find yield today.

http://www.capitalspectator.com/desperately-seeking-yield-20-october-2020-edition/#more-14916

Here is a thought for those that do not want to assume the risk of holding individual stocks and would prefer an ETF/mutual fund.

https://seekingalpha.com/article/4379755-vym-one-of-better-choices-for-passive-investor-today?utm_medium=email&utm_source=seeking_alpha&mail_subject=vym-one-of-the-better-choices-for-the-passive-investor-today&utm_campaign=nl-etf-daily&utm_content=link-0

News on Stocks in Our Portfolios

MSC Industrial Direct (NYSE:MSM) declares $0.75/shar quarterly dividend, in line with previous.

Canadian National Railway (NYSE:CNI): Q3 Non-GAAP EPS of C$1.38 misses by C$0.08; GAAP EPS of C$1.38 misses by C$0.06.

Revenue of C$3.41B (-11.0% Y/Y) misses by C$80M.

Canadian National Railway (NYSE:CNI) declares CAD 0.575/share quarterly dividend, in line with previous.

What I am reading today

A great must read article on the current political scene from a liberal author.

https://johnhcochrane.blogspot.com/2020/10/understanding-left.html

Yeah, this is going to help America be more competitive.

https://www.zerohedge.com/political/san-diego-school-district-announces-it-will-eliminate-grading-standards-combat-racism

So, will this.

https://www.zerohedge.com/markets/university-chicago-faculty-demands-reparations

Visit Investing for Survival’s website (http://investingforsurvival.com/home) to learn more about our Investment Strategy, Prices Disciplines and Subscriber Service.

Tuesday, October 20, 2020

The Morning Call--More debt equals less growth

The Morning Call

10/20/20

The Market

Technical

Beware of the impact of target date funds.

https://blog.evergreengavekal.com/swimming-with-the-target-date-whale/

Monday in the charts.

https://www.zerohedge.com/markets/black-ish-monday-stimulus-stumble-sparks-big-techs-worst-streak-14-months

Fundamental

Headlines

The Economy

Month to date retail chain store sales grew faster than in the prior week.

September housing starts rose 1.9% versus expectations of up 4.9%; building permits were up 5.2% versus +2.9%.

https://www.zerohedge.com/personal-finance/single-family-housing-startspermits-soar-highest-2007

The October housing index came in at 85 versus consensus of 83.

https://www.calculatedriskblog.com/2020/10/nahb-builder-confidence-increased-to-85.html

International

September German PPI was up 0.4% versus estimates of -0.1%.

Other

Recessions are a good thing.

https://www.advisorperspectives.com/commentaries/2020/10/19/recessions-are-a-good-thing-let-them-happen

Vehicle miles driven decreased 12.3% YoY in August.

https://www.calculatedriskblog.com/2020/10/dot-vehicle-miles-driven-decreased-123.html

Fiscal Policy

Fiscal cliffication looms if no stimulus deal.

https://www.nakedcapitalism.com/2020/10/fiscal-cliffication-continues-as-the-election-looms.html

The coronavirus

Last week, I went to California. The plane, both ways, was completely full. So, it appears that Americans are paying attention to the stats and are deciding to resume life to the extent possible. More evidence:

https://www.zerohedge.com/personal-finance/tsa-passenger-traffic-tops-million-sunday-return-normalcy-continues

Bottom line. As you know, one of my key economic/investment thesis is that the rising level of debt (government, corporate, individual) will stymie economic growth. Rogoff and Reinhart produced a major study showing that when government debt exceeds 90% of GDP, it became a barrier to growth---the reason being that servicing that debt consumed so much investment capital that what was left was insufficient to fund normal economic growth. That thesis has played out over the last decade as the long term secular growth rate of the US economy has been subpar. Looking ahead, this problem is only going to get worse as our political class is adding trillions of dollars of new debt annually. So, those of you thinking that the US long term secular economic growth (and hence, corporate profit growth) is going to accelerate as the US emerges from the coronavirus crisis, you may want to reconsider.

Here are a couple of articles addressing this issue on more detail.

The problem with debt.

https://alephblog.com/2020/10/15/the-rules-part-lxvii/

Monday, October 19, 2020

Monday Morning Chartology

The Morning Call

10/19/20

The Market

Technical

On Thursday, the S&P broke the short term trend of higher lows to the downside. While it recovered on Friday, it was not enough to recapture the trend. That sets up the potential of having made a high that is lower than its early September high and creating a double top. It is way too soon to make that call but, as I said, the potential now exists. Stay tuned.

https://www.zerohedge.com/markets/robinhood-warns-day-traders-raise-margin-requirements-widely-held-stocks

Recall that in late September, the long bond broke out of a pennant formation to the upside---a technical signal of a further move up. Well, just to show technical rules are not cast in stone, TLT almost immediately made a big move down resetting the trend of lower highs---a sign of lower prices (higher yields). The key now is whether TLT can hold above its 200 DMA (wiggly blue line). If so, any move to higher rates will be limited. If not, it would be a sign of mounting investor concern about inflation, safety or both.

https://www.zerohedge.com/markets/foreigners-dump-us-treasurys-august-chinas-holdings-drop-almost-4-year-low

Gold continues to struggle for direction. I thought that the gap up open/break of the trend of lower highs that occurred Friday before last was a harbinger of an upside break in price. But there was no follow through and GLD sold off; although it didn’t violate a trend of higher lows. Now it is right on the point of a pennant formation. The technical rule is that any move from the point is an indication of further follow through in direction of that move. Stay tuned.

In late September, the dollar broke to the upside out of a short term downtrend. While my hope was that it would continue to recover, after a short rally, it resumed its downward trajectory making a new series of lower highs. It still has the lower boundaries of both its short term trading range and intermediate term uptrend as support. But it seems likely that it at least will make a second attempt to challenge the lower boundary of its short term trading range. Stay tuned.

It seems that ‘stay tuned’ remains the current technical theme. When the major indicators are all signaling that in unison, historically the best strategy is to do nothing.

Friday in the charts.

https://www.zerohedge.com/markets/vix-stocks-rise-week-banks-puke-ahead-black-monday-anniversary

Fundamental

Headlines

The Economy

Last Week in Review

Last week was another slow one for statistical releases in the US. What we got was basically mixed. The fact that the data remains mixed, however skimpy, fits with the current pattern of economic improvement but not in the ‘V’ shape that is hoped for.

Overseas, the indicators were also sparce and mixed---not much informational value there. So, after two very positive weeks of results, global stats are back to a mixed to negative bias. Not helpful to our own recovery.

Whatever the shape or magnitude of the near term bounce back, I am not altering my belief that long term the economy will grow at a historically subpar secular rate due to the twin burdens of egregiously irresponsible fiscal and monetary policies---which, by the way, are becoming even more egregiously irresponsible as a result of measures being taken by the government and the Fed in dealing with the current crisis.

International

The September Japanese trade balance was Y675 billion versus projections of Y989.8 billion.

Q3 Chinese YoY GDP growth was 4.9% versus estimates of 5.2%; industrial production was up 6.9% versus 5.8%; retail sales rose 3.3% versus 1.8%.

https://www.zerohedge.com/geopolitical/china-q3-gdp-disappoints-retail-sales-signal-domestic-rebound-alive

Other

Update on big four economic indicators.

https://www.advisorperspectives.com/dshort/updates/2020/10/16/the-big-four-september-retail-sales-sees-all-time-high

Commercial construction backlog falls in September.

https://www.zerohedge.com/economics/after-brief-uptick-commercial-construction-backlog-falls-again

World Bank economist says financial crisis could emerge from pandemic.

https://www.bloomberg.com/news/articles/2020-10-16/carmen-reinhart-sees-risk-financial-crisis-emerges-from-pandemic?sref=loFkkPMQ

The Fed

All that is wrong with the US financial system.

https://www.zerohedge.com/markets/one-chart-summary-all-wrong-us-financial-system-deposits-over-loans

Fiscal Policy

2020 budget deficit triples to $3 trillion.

https://www.zerohedge.com/markets/budget-deficit-hits-record-21-trillion-fiscal-2020-us-spends-90-more-it-collects

China

UK spy chief warns of Chinese covert activities.

https://www.zerohedge.com/geopolitical/uks-new-spy-chief-says-chinas-covert-activities-biggest-long-term-threat

Bottom line.

Growth versus value post-election.

http://www.capitalspectator.com/will-value-stocks-overtake-growth-shares-after-the-election/

News on Stocks in Our Portfolios

V.F. Corp (NYSE:VFC): FQ2 Non-GAAP EPS of $0.67 beats by $0.19; GAAP EPS of $0.62 beats by $0.15.

Revenue of $2.61B (-17.9% Y/Y) beats by $70M.

V.F. Corp. (NYSE:VFC) declares $0.49/share quarterly dividend, 2.1% increase from prior dividend of $0.48.

Paychex (NASDAQ:PAYX) declares $0.62/share quarterly dividend, in line with previous.

What I am reading today

Visit Investing for Survival’s website (http://investingforsurvival.com/home) to learn more about our Investment Strategy, Prices Disciplines and Subscriber Service.

Wednesday, October 14, 2020

The Morning Call---Hear no risk, see no risk, speak no risk

The Morning Call

10/14/20

I am gone until next Monday

The Market

Technical

Tuesday in the charts.

https://www.zerohedge.com/markets/banks-bust-bullion-battered-sterling-slammed-stocks-slump

Fundamental

Headlines

The Economy

Weekly mortgage applications fell 0.7% and purchase applications declined 1.7%.

The September small business optimism index was reported at 104.0 versus estimates of 99.0.

https://www.advisorperspectives.com/dshort/updates/2020/10/13/nfib-small-business-survey-improvement-in-september

International

August Japanese industrial production was up 1.0% versus consensus of up 1.7%.

August EU industrial production was up 0.7% versus predictions of up 0.8%.

Other

The ‘K’ shaped recovery.

https://www.zerohedge.com/economics/k-shaped-recovery-v-some-not-most

October IMF global growth outlook.

http://econbrowser.com/archives/2020/10/october-imf-world-economic-outlook

Johnson says he won’t walk away from Brexit negotiations.

https://www.zerohedge.com/markets/odds-no-deal-brexit-plunge-boris-johnson-signals-he-wont-walk-away-talks-eu

The Fed

Central banks in overdrive.

https://www.bloomberg.com/news/articles/2020-10-13/central-banks-in-qe-overdrive-to-finance-deficit-spending-chart?sref=loFkkPMQ

The coronavirus

Lockdowns have been a disaster.

https://issuesinsights.com/2020/10/13/covid-19-lockdowns-have-been-a-disaster-end-them-now/

Global GDP loss due to coronavirus reaches $12 trillion.

https://politicalcalculations.blogspot.com/2020/10/world-gdp-lost-due-to-coronavirus.html#.X4X03GhKiM8

Patriotism in a contemptible country.

https://unclenap.com/patriotism-in-a-contemptible-country/

It is about time: court rules Michigan’s governor’s emergency pandemic executive powers unconstitutional.

https://www.zerohedge.com/markets/michigan-supreme-court-denies-gov-whitmer-request-extension-pandemic-executive-powers

Lilly joins JNJ is suspending coronavirus treatment tests.

https://www.zerohedge.com/markets/eli-lilly-suspends-covid-19-antibody-therapy-trial-over-potential-safety-concern

We destroyed the greatest economy in the world for no reason.

https://www.zerohedge.com/economics/rickards-we-destroyed-worlds-greatest-economy-no-reason

Bottom line. Hear no risk, see no risk, speak no risk.

https://www.zerohedge.com/markets/see-no-risk

There is no Smart Money.

https://www.epsilontheory.com/the-frustrated-money-manager/

Possible outcome of ‘blue wave’ election

https://www.advisorperspectives.com/commentaries/2020/10/13/global-impact-of-a-blue-wave-election-outcome

Don’t mix politics with your portfolio.

https://awealthofcommonsense.com/2020/10/dont-mix-your-politics-with-your-portfolio/

News on Stocks in Our Portfolios

Procter & Gamble (NYSE:PG) declares $0.7907/share quarterly dividend, in line with previous.

Cummins (NYSE:CMI) declares $1.35/share quarterly dividend, 3% increase from prior dividend of $1.311.

ATT: it is about more than just a dividend.

https://seekingalpha.com/article/4378928-retirement-strategy-and-t-is-just-dividend?utm_medium=email&utm_source=seeking_alpha&mail_subject=retirement-strategy-at-t-is-more-than-just-about-the-dividend&utm_campaign=nl-investing-income&utm_content=link-0

What I am reading today

Berlin and the road to socialism.

https://www.adamsmith.org/blog/berlin-and-the-road-to-socialism

Visit Investing for Survival’s website (http://investingforsurvival.com/home) to learn more about our Investment Strategy, Prices Disciplines and Subscriber Service.

Wednesday, October 21, 2020

The Morning Call--Just because you are too young to remember a crash doesn't mean it won't happen

Tuesday, October 20, 2020

The Morning Call--More debt equals less growth

Monday, October 19, 2020

Monday Morning Chartology

Wednesday, October 14, 2020

The Morning Call---Hear no risk, see no risk, speak no risk

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